RETROACTIVE PAY INCREASE FOR MUNICIPAL EMPLOYEES

RETROACTIVE PAY INCREASE FOR MUNICIPAL EMPLOYEES.

City employees may not obtain a retroactive pay increase except in pursuance of an agreement under which services were performed with the understanding that an adjustment to be arrived at would be applicable to the period specified in the agreement.

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                                                                   June 12, 1951

Senator Gerald G. Dixon
3726 South Tacoma Avenue
Tacoma, Washington                                                                                                  Cite as:  AGO 51-53 No. 66

Dear Senator Dixon:

            Receipt is acknowledged of your letter of June 2, 1951, in which you request our opinion as to the legality of an increase in pay to city employees retroactive to October of last year if sufficient funds are in the budget.  Your question deals with the Municipal Belt Line employees of the city railroad who are affiliated with the railroad brotherhoods with whom the carriers have recently concluded a settlement granting thirty-three cents per hour for yardmen retroactive to last October.

            It is our conclusion that a retroactive pay increase may not be granted to city employees unless there was in effect during the period for which the increase is to be granted an agreement to the effect that the compensation for that period would be adjusted when a settlement should be arrived at.

                                                                     ANALYSIS

            Section 25, Article II, of the state constitution provides:

            "The legislature shall never grant any extra compensation to any public officer, agent, servant, or contractor after the services shall have been [[Orig. Op. Page 2]] rendered or the contract entered into, nor shall the compensation of any public officer be increased or diminished during his term of office."

            Our Supreme Court has held that this section of the constitution, although in terms a limitation upon the power of the legislature, is nevertheless, equally applicable to municipal corporations and political subdivisions of the state.  In the case ofChristie v. Port of Olympia, 27 Wn. (2d) 534, 179 P. (2d) 294, the Supreme Court held that while under this section it would not be possible for a municipal corporation to grant a retroactive pay increase, it was permissible to make a deferred payment pursuant to an agreement whereby employees were given additional pay for work performed during a period when they had continued to perform services under an agreement that as a condition to their not striking they would receive the amount of any pay adjustment finally agreed upon, retroactively to the date specified in the agreement.  The Supreme Court held that such an arrangement was not actually a retroactive pay increase, but amounted merely to deferring until the final settlement was arrived at, a portion of their earnings represented by the amount of the increase to be determined by the award.  In making this distinction the court said:

            "The respondent contends that payments made by a port commission in accordance with such a contract would be a gift of public moneys, in violation of Art. VIII, § 7, of the state constitution, the material part of which reads as follows:

            "'s 7.  CREDIT NOT TO BE LOANED.‑-No county, city, town, or other municipal corporation shall hereafter give any money or property, or loan its money or credit, to or in aid of any individual, association, company, or corporation, * * *'

            "It is further contended that, at all events, the making of the payments provided in the alleged contract would be a literal violation of Art. II, § 25, of the state constitution, which reads as follows,

            "EXTRA COMPENSATION, PROHIBITED‑-The legislature shall never grant any extra compensation to any public officer, agent, servant, or  [[Orig. Op. Page 3]]contractor after the services shall have been rendered or the contract entered into, nor shall the compensation of any public officer be increased or diminished during his term of office.'  (Italics ours)

            "We think there is no merit in these contentions.  The payments contemplated are neither gifts nor 'extra compensation.'  Assuming for the present that the contract was legally made, the payments represent compensation which accrued in strict pursuance to a contract made before the work was done.  It is true that the resolution providing for the payments is unhappily worded.  It speaks of 'retroactive compensation,' but, plainly, it is merely deferred compensation that was provided for in the contract.

            "Retroactive payments and retroactive compensation, in the true sense, arise out of such situations as the following:  Workmen say to their employer:  Our wages are unfairly low and have been for many months.  We will strike on June 1st unless you not only raise our wages twenty cents an hour from then on, but also pay us an additional ten cents for each hour we have worked since January 1st.  Such contracts have been frequently made.  A private employer can validly make such a contract with his workmen, but, if a municipal corporation should make such a contract, it would probably run afoul of one or both of the constitutional provisions above quoted.  It would at least seem indisputable that the payment of the additional ten cents an hour for work done from January 1st to June 1st in the case supposed would be extra compensation after the service was rendered, but the payments claimed under the alleged contract (if there was such a contract) were earned day by day according to the terms thereof.  Payments were merely deferred."

             [[Orig. Op. Page 4]]

            It will be seen from this decision of the Supreme Court that although a retroactive pay increase may not constitutionally be granted by a municipal corporation, if there was an agreement outstanding during the period for which it is sought to make the payment applicable to the effect that any final adjustment would apply to that period, such a payment may be made.  We are not informed as to whether there was any such agreement in the case of the Tacoma Belt Line, but we trust, that from the foregoing discussion you may determine whether the payment about which you inquire may be made.

Very truly yours,

SMITH TROY
Attorney General

LYLE L. IVERSEN
Assistant Attorney General